by Fresh Start Tax | Jan 15, 2013 | Tax Help
OWE 943 Taxes – Agricultural Employees – File, Settle with IRS
We are comprised of attorneys, CPAs, and former IRS agents. We have over 206 years of professional tax experience in over 60 years of working directly with the IRS. We were former managers & instructors at IRS and can help you with any tax issue that you may have. 1-866-700-1040.
If you currently owe 943 taxes as a result of agricultural employees call us today and let us work a settlement out with IRS so your life and business can continue as normal.
All consultations are free and we can design a plan specifically that meets your financial needs.
The Form 943
Agricultural employers use Form 943 to report income tax withheld and social security and Medicare taxes on wages paid to farm workers, including household employees working in a private home on a for-profit farm.
Who Must File form 943
File Form 943 if you paid wages to one or more farm workers and the wages were subject to social security and Medicare taxes or federal income tax withholding.
For more information on farm workers and wages, see Pub. 51 (Circular A).
The $150 Test or the $2,500 Test
All cash wages that you pay to farm workers are subject to social security and Medicare taxes and federal income tax withholding for any calendar year that you meet either of
the tests listed below.
You pay an employee cash wages of $150 or more in a year for farm work.
The total (cash and non cash) wages that you pay to all farm-workers is $2,500 or more.
If the $2,500-or-more test for the group is not met, the $150-or-more test for an individual still applies.
Exceptions.
Special rules apply to certain hand-harvest laborers who receive less than $150 in
annual cash wages.
For more information, see section 4 of Pub. 51 (Circular A).
When To File
For 2012, file Form 943 by January 31, 2013. However, if you made deposits on time in full payment of the taxes due for the year, you may file the return as late as February 11, 2013.
Final Return
If you stop paying wages during the year and do not expect to pay wages again, file a final return for 2012. Be sure to mark the box above line 1 on the form indicating that you do not have to file returns in the future.
If you later become liable for any of the taxes, notify the IRS.
Employer Identification Number (EIN)
If you do not have an EIN, you may apply for one online.
Go to IRS.gov and click on the Apply for an EIN Online link under “Tools.” You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. If you have not received your EIN by the due date of Form 943, write “Applied For” and the date you applied in this entry space.
Forms W-2 and W-3
By January 31, 2013, give Form W-2 to each employee who was working for you at the end of 2012. If an employee stops working for you before the end of the year, give him or her Form W-2 any time after employment ends but no later than January 31 of the following year. If the employee asks you for Form W-2, give him or her the completed form within 30 days of the request or the last wage payment, whichever is later.
OWE 943 Taxes – Agricultural Employees – File, Settle with IRS
by Fresh Start Tax | Jan 12, 2013 | Tax Help
IRS Plans Jan. 30 Tax Season Opening For 1040 Filers
Under the Tax Law Changes
Following the January tax law changes made by Congress under the American Taxpayer Relief Act (ATRA), the Internal Revenue Service announced today it plans to open the 2013 filing season and begin processing individual income tax returns on Jan. 30.
The IRS will begin accepting tax returns on that date after updating forms and completing programming and testing of its processing systems.
This will reflect the bulk of the late tax law changes enacted Jan. 2.
The announcement means that the vast majority of tax filers , more than 120 million households should be able to start filing tax returns starting Jan 30.
Groups that will take longer
The IRS estimates that remaining households will be able to start filing in late February or into March because of the need for more extensive form and processing systems changes. This group includes people claiming residential energy credits, depreciation of property or general business credits.
Most of those in this group file more complex tax returns and typically file closer to the April 15 deadline or obtain an extension.
The IRS will not process paper tax returns before the anticipated Jan. 30 opening date. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit.
The opening of the filing season follows passage by Congress of an extensive set of tax changes in ATRA on Jan. 1, 2013, with many affecting tax returns for 2012.
While the IRS worked to anticipate the late tax law changes as much as possible, the final law required that the IRS update forms and instructions as well as make critical processing system adjustments before it can begin accepting tax returns.
The IRS originally planned to open electronic filing this year on Jan. 22; more than 80 percent of taxpayers filed electronically last year.
Who Can File Starting Jan. 30?
The IRS anticipates that the vast majority of all taxpayers can file starting Jan. 30, regardless of whether they file electronically or on paper.
The IRS will be able to accept tax returns affected by the late Alternative Minimum Tax (AMT) patch as well as the three major “extender” provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.
Who Can’t File Until Later?
There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting tax returns including these tax forms between late February and into March; a specific date will be announced in the near future.
The key forms that require more extensive programming changes include Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). A full listing of the forms that won’t be accepted until later is available on IRS.gov.
As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure as smooth a tax season as possible under the circumstances.
by Fresh Start Tax | Jan 11, 2013 | Tax Help
OWE Railroad Retirement CT-1 -File, Settle, Resolve Tax Debt
If you owe taxes to the IRS or you need to file, settle, or resolve your back tax situation you should call the tax professionals at fresh start tax.
Call us today for a no cost professional tax consult. 1-866-700-1040.
We have over 206 years of professional tax experience and over 60 years of working directly for the Internal Revenue Service and the local, district, and regional offices. We also taught tax law and IRS.
Please find below some of the information regarding the filing of the CT – 1.
File Form CT-1 if you paid one or more employees compensation subject to tax under RRTA.
A payer of sick pay (including a third party) must file Form CT-1 if the sick pay is subject to Tier I railroad retirement taxes.
Include sick pay payments on lines 7–10 of Form. CT-1. Follow the reporting procedures for sick pay reporting in section 6 of Pub. 15-A.
You should disregarded entities and qualified sub chapter S subsidiaries.
Regulations section301.7701-2(c)(2)(iv) treats eligible single-owner disregarded entities and qualified sub chapter S subsidiaries as separate entities for employment tax purposes.
Under these regulations, eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees after December 31, 2008, using the entities’ own names and EINs.
For more information, see Disregarded entities and qualified
sub Chapters-S subsidiaries in the Introduction section of Pub. 15 (Circular E).
Where To File
Send Form CT-1 to:
Department of the Treasury
Internal Revenue Service
Cincinnati, OH 45999-0007
When To File
File Form CT-1 by February 28, 2013.
Definitions
The terms “employer” and “employee” used in these instructions are defined in section 3231 and in its regulations.
Compensation
Compensation means payment in money, or in something that may be used instead of money, for services performed as an employee of one or more employers. It includes payment for time lost as an employee.
A few exceptions are described below under Exceptions. Group-term life insurance. Include in compensation the cost of group-term life insurance over $50,000 you provide loan employee. This amount is subject to Tier I and Tier II taxes, but not to federal income tax withholding.
Include this amount on your employee’s Form W-2, Wage and Tax Statement.
Former employees for whom you paid the cost of group-term life insurance over $50,000 must pay the employee’s share of these taxes with their Form 1040, U.S. Individual Income Tax Return.
You are not required to collect those taxes. For former employees, you must include on Form W-2 the part of compensation that consists of the cost of group-term life insurance over $50,000 and the amount of railroad retirement taxes owed by the former employee for coverage provided after separation from service.
OWE Railroad Retirement CT-1 – File, Settle, Resolve Excise Tax Debt
by Fresh Start Tax | Jan 11, 2013 | Tax Help
Owe Payroll, Trust Fund Taxes, Call Former IRS Agents 1-866-700-1040
If you will owe back payroll taxes, 941 taxes, or trust fund taxes call Fresh Start Tax LLC today and we can offer you a free consultation on how to completely resolve this matter. We are tax experts in this area.
On staff are tax attorneys, CPAs, and former IRS agents and appeals officers. We have over 205 years of professional tax experience in over 60 years of working directly for the IRS in the local, district, and regional offices of the Internal Revenue Service.
Whether you are in business or just worried call us today to hear the best advice on how to bring your case to a peaceful resolution.
Payroll taxes are an IRS priority
IRS considers payroll taxes part of the trust fund tax family. IRS considers these payroll taxes a priority since the taxes are really not a direct tax but monies that are held in trust by a company or corporation that has not been turned over IRS. So the highest priority is given collecting trust fund money.
Good Advice
If you are currently in business the best advice we can give you being former IRS agents is to make sure you are at least current for the week, month or current quarter. When IRS sees that your current they are more than likely to offer you a payment plan.
Payroll Taxes turn in Trust Fund Cases
It also should be known that these payroll taxes spawn off trust fund taxes . The Trust Fund tax is a result of nonpayment of 941 payroll taxes.
As a result IRS will impose under section 6672 of the IRC code an assessment against those responsible for paying the payroll taxes. This trust fund tax comprises of all the withholding in one half of the employee Social Security. The responsible persons are not responsible for the employers part of the Social Security, the penalties, the interest or the unemployment taxes.
The position of the IRS
To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, Congress passed a law that provides for the TFRP.
These taxes are called trust fund taxes because you actually hold the employee’s money in trust until you make a federal tax deposit in that amount. The TFRP may apply to you if these unpaid trust fund taxes cannot be immediately collected from the business. The business does not have to have stopped operating in order for the TFRP to be assessed.
Responsible for the Trust Fund Cases
The Trust Fund may be assessed against any person who:
a. is responsible for collecting or paying withheld income and employment taxes, or for
b. paying collected excise taxes, and
c. willfully fails to collect or pay them.
A Responsible Person
A responsible person is a person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes.
This person may be:
1. an officer or an employee of a corporation,
2. a member or employee of a partnership,
3. a corporate director or shareholder,
4. a member of a board of trustees of a nonprofit organization,
5. another person with authority and control over funds to direct their disbursement, or
6. another corporation or third party payer.
Willfulness for Trust Fund
For willfulness to exist, the responsible person:
a. must have been, or should have been, aware of the outstanding taxes and
b. either intentionally disregarded the law or was plainly indifferent to its requirements.
Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.
How IRS conducts there investigation
You may be asked to complete an interview ( form 4180 can be found on our website )in order to determine the full scope of your duties and responsibilities.
Responsibility is based on whether an individual exercised independent judgment with respect to the financial affairs of the business.
An employee is not a responsible person if the employee’s function was solely to pay the bills as directed by a superior, rather than to determine which creditors would or would not be paid.
Figuring the Trust Fund Amount
The amount of the penalty is equal to the unpaid balance of the trust fund tax. The penalty is computed based on:
a. The unpaid income taxes withheld, plus
b. The employee’s portion of the withheld FICA taxes.
For collected taxes, the penalty is based on the unpaid amount of collected excise taxes.
Assessing the Trust Fund
If the IRS determines that you are a responsible person, IRS will provide you a letter stating that we plan to assess the TFRP against you.
You will have 60 days (75 days if this letter is addressed to you outside the United States) from the date of this letter to appeal our proposal. The letter will explain your appeal rights.
Caution
Once the IRS asserts the trust fund penalty, IRS can take collection action against your personal assets.
Owe Payroll, Trust Fund Taxes, Call Former IRS Agents
by Fresh Start Tax | Jan 10, 2013 | Owe Payroll Taxes, Representation, Tax Help
Owe IRS Trust Fund Taxes – Let Former IRS Agent Resolve, Settle
Call us today and speak directly to Tax Attorneys, CPAs, or former IRS agents. We are tax specialists in the quick resolution of IRS trust fund taxes. If you owe back trust fund taxes or in need of filing in a Appeal we can help.
All initial consultations are free. 1-866-700-1040.
Trust fund taxes are a special breed of taxes are owed to IRS. They are comprised of unpaid payroll taxes. When IRS collects the trust fund penalty IRS is seeking a payment comprising of the withholding tax and one half of the Social Security tax not paid on 941 payroll tax returns. This usually results in a tax saving about 40%.
There are multiple tax defenses to go ahead and defend the assertion of the trust find taxes or civil penalties levied or imposed by Internal Revenue Service.
Trust Fund Recovery Penalty Assessments
The trust fund recovery penalty, applicable to withheld income and employment (social security and railroad retirement) taxes or collected excise taxes, will be used to facilitate the collection of tax and enhance voluntary compliance.
If a business has failed to collect or pay over income and employment taxes ( 941) , or has failed to pay over collected excise taxes, the trust fund recovery penalty may be asserted against those determined to have been responsible and willful in failing to pay over the tax.
A Key Point
Responsibility and willfulness must both be established.
The withheld income and employment taxes or collected excise taxes will be collected only once, whether from the business, or from one or more of its responsible persons.
Collection of the withheld income and employment taxes or collected excise taxes is achieved when the Service’s right to retain the amount collected is established.
Determination of Responsible Persons for the Trust Fund Taxes.
Tax Responsibility is a matter of status, duty, and authority.
Those persons performing ministerial acts without exercising independent judgment will not be deemed responsible.
In general, non-owner employees of the business entity, who act solely under the dominion and control of others, and who are not in a position to make independent decisions on behalf of the business entity, will not be asserted the trust fund recovery penalty.
How IRS determines who is responsible for the trust fund penalty.
1. Who directed or authorized payments of bills to creditors,
2. Who had the right to open and close bank accounts for the business,
3. Good guarantee or cosign loans for the business,
4. Who signed or could cosign checks,
5. Who authorized payroll, who is authorized to make federal tax deposits.
6. Who filled out payroll tax form 941,
7. Who prepared reviewed or signed or transmitted payroll tax returns to the IRS or to the accountant,
8. Who had the right to hire or fire employees,
9. Who made sure other bills were paid other than the IRS,
10. If you were to ask the employees of the company who in fact ran the business who would they point to,
11. Who ran day-to-day operations of the business.
While this is not an all-encompassing list of who is responsible for the trust fund taxes of a company or corporation, this would give the revenue officer out the local office of a good idea to look.
Non Profit Trust Fund Cases Cases
The trust fund penalty shall not be imposed on unpaid, volunteer members of any board of trustees or directors of an organization referred to in section 501 of the Internal Revenue Code to the extent such members are solely serving in an honorary capacity, do not participate in the day-to-day or financial operations of the organization, and/or do not have knowledge of the failure on which such penalty is imposed.
in order to make accurate determinations the IRS will weigh all relevant issues and should be thoroughly investigated.
Non assertion of the Trust Fund Penalty
An individual will not be recommended for assertion if sufficient information is not available to demonstrate he or she was actively involved in the corporation at the time the liability was not being paid.
This shall not apply if the potentially responsible individual intentionally makes information unavailable to impede the investigation.
IRS Field investigations to determine the trust fund recovery penalty liability will be conducted promptly to enhance access to relevant information and reduce burden to taxpayers.
Absent statute considerations, assertion recommendations normally will be withheld in cases of approved and adhered to business installment agreements and bankruptcy payment plans. To the extent necessary, information will be gathered to support a possible assessment in the event the agreement is defaulted.
Application of Payments in Determining Trust Fund Recovery Penalty Assessments
Effective for assessments where notices of TFRP liability are issued on or after June 19, 2000 and for any undesignated payment made on or after January 1, 2003)
Any payment made on the business account is deemed to represent payment of the non trust fund portion of the tax liability (e.g., employer’s share of FICA) unless designated otherwise by the taxpayer.
The taxpayer, of course, has no right of designation of payments resulting from enforced collection measures.
To the extent partial payments exceed the non trust fund portion of the tax liability, they are deemed to be applied against the trust fund portion of the tax liability (e.g., withheld income tax, employee’s share of FICA, collected excise taxes).
Once the non trust fund and trust fund taxes are paid, the remaining payments will be considered to be applied to assessed fees and collection costs, assessed penalty and interest, and accrued penalty and interest to the date of payment.
Small Business Administration regarding Assertions of the Trust Fund.
When employees of the Small Business Administration perform duties in accordance with the regulations of the agency, the Service will not consider assertion of the liability provided by IRC 6672 or 3505 against those Small Business Administration employees in any past, current or future cases arising out of these duties.
A footnote should be added about the assertion of the trust fund penalties.
The local revenue officers have tremendous power in determining who is and who is not responsible for these trust fund taxes. I would tell anybody working on their own case if you do not like the decision from the local revenue officer to make sure you contact the manager in the local office.
IRS will issue a form 2751 if in fact you are held responsible for the trust fund tax.
You have a 60 day right to appeal that starts from the date of the letter from the Revenue Officer.
Call us today for free tax consultation and we will review your case.
by Fresh Start Tax | Jan 10, 2013 | Tax Help
National Taxpayer Advocate Delivers Annual Report to Congress
TAX REFORM
The National Taxpayer Advocate’s annual report designates the complexity of the tax code as the #1 most serious problem facing taxpayers and recommends that Congress take significant steps to simplify it. “The existing tax code makes compliance difficult, requiring taxpayers to devote excessive time to preparing and filing their returns,” Olson wrote. “It obscures comprehension, leaving many taxpayers unaware how their taxes are computed and what rate of tax they pay; it facilitates tax avoidance by enabling sophisticated taxpayers to reduce their tax liabilities and provides criminals with opportunities to commit tax fraud; and it undermines trust in the system by creating an impression that many taxpayers are not compliant, thereby reducing the incentives that honest taxpayers feel to comply.”
Compliance Burdens. The report states that the tax code imposes a “significant, even unconscionable, burden on taxpayers.” Since 2001, Congress has made nearly 5,000 changes to the tax code, an average of more than one a day, and the number of words in the code appears to have reached nearly four million.
Over 60 % of Americans use hired preparers
Individual taxpayers find return preparation so overwhelming that few do it on their own. Nearly 60 percent of taxpayers hire paid preparers, and another 30 percent rely on commercial software, with leading software packages costing $50 or more.
In other words, taxpayers must spend money just to figure out how much money they owe.
Magnitude of “Tax Expenditures.” To reduce taxpayer burden and enhance public confidence in the integrity of the tax system, the report urges Congress to greatly simplify the tax code. In general, this means Congress should reassess the need for existing income exclusions, exemptions, deductions and credits (generally known as “tax expenditures”).
For fiscal year (FY) 2013, the Joint Committee on Taxation has projected that tax expenditures will come to about $1.09 trillion, while individual income tax revenue is projected to be about $1.36 trillion.
To put these numbers in perspective, if Congress were to eliminate all tax expenditures, straight math indicates it could cut individual income tax rates by 44 percent and still generate the same amount of revenue it collects under current rules.
Tax Policy Decisions and Revenue Decisions Should Be Made Separately and Then Married Up.
IRS FUNDING
The IRS budget has been reduced in each of the last two fiscal years, and appears likely to face further cuts in coming years. Although these cuts reflect across-the-board reductions in federal discretionary spending, underfunding the IRS makes no sense, Olson said. “The IRS is materially different from other discretionary programs in that it serves as the de facto Accounts Receivable Department of the federal government.
Each dollar appropriated for the IRS generates substantially more than one dollar in additional revenue. It is therefore ironic and counterproductive that concerns about the deficit are leading to cuts in the IRS budget, when those cuts are making the deficit larger.”
IRS Funding Decisions Fail to Take Into Account “Return on Investment.” On a budget of $11.8 billion, the IRS collected $2.52 trillion in FY 2012.
That translates to an average return-on-investment (ROI) of about 214:1. Yet the appropriations process treats the IRS like any other discretionary spending program, with no explicit recognition that each dollar appropriated for the IRS generates substantially more than one dollar in additional revenue.
Last year, the IRS Commissioner estimated in a letter to Congress that proposed reductions in the IRS budget would cause tax collections to fall seven times as much.
“No business would fail to fund a unit that, on average, brought in $7 for every dollar spent. Shareholders would rebel and bring lawsuits, or at least oust the management or board of directors,” Olson wrote in her preface to the report. “Yet this is precisely what we are doing with the IRS budget.”
Lack of Funding Hampers Taxpayer Service.
The report says that lack of funding is also preventing the IRS from meeting taxpayer needs. Since FY 2004, when taxpayer service levels peaked, the IRS’s performance in handling telephone calls and correspondence has been declining. In FY 2004, the IRS answered 87 percent of all calls seeking to reach a live telephone assistor, and the average wait time was just over 2½ minutes.
In FY 2012, the IRS answered just 68 percent of its calls, and those who got through spent an average of nearly 17 minutes waiting on hold.
In FY 2012, the IRS received over 10 million letters in response to proposed tax adjustments, and at the end of the year, 48 percent of all taxpayer correspondence in its inventory had not been processed within established time frames – up dramatically from 12 percent in FY 2004.
“Congress has enacted laws that now require more than 140 million individuals to file income tax returns,” Olson said. “When taxpayers are attempting to comply with laws that require them to turn over a significant portion of their incomes to pay our nation’s bills, they have a right to expect that their government will do a better job of taking their telephone calls and answering their letters.”
The IRS has largely automated its correspondence audits and its issuance of liens and levies. It typically moves forward with tax assessments without first talking to taxpayers to give them a chance to substantiate their return positions, and it proceeds with liens and levies before having a conversation to find out whether a tax delinquency is due to financial hardship, which would suggest that an installment agreement or offer-in-compromise should be considered.”
The report notes that the IRS’s limited resources to conduct outreach and education to taxpayers (particularly small businesses) and to enforce the laws also contribute to its inability to close the annual tax gap, which was most recently estimated at nearly $400 billion in 2006.
The report points out that noncompliance violates the rights of compliant taxpayers, who indirectly pay more tax to make up the shortfall.
Based on Census Bureau data, the average household effectively paid an extra $3,300 in tax in 2006 to subsidize noncompliance by others.
TAX-RELATED IDENTITY THEFT
The number of tax-related identity theft incidents has increased substantially in recent years. Within TAS, identity theft case receipts increased by more than 650 percent from FY 2008 to FY 2012. At the end of FY 2012, the IRS had almost 650,000 identity-theft cases in its inventory service wide.
The problem has grown worse as organized criminal actors have found ways to steal the Social Security numbers (SSNs) of taxpayers, file tax returns using those taxpayers’ names and SSNs, and obtain fraudulent tax refunds. Then, when the real taxpayer files a return claiming the refund, that return is rejected. The impact on victims is significant.
More than 75 percent of taxpayers filing returns are due refunds, which average some $3,000 and are not paid until the IRS fully resolves a case.
IRS Performance.
The report says the IRS has created numerous task forces and other teams in recent years in an attempt to improve its identity theft processes, yet victims still face the same “labyrinth of procedures and drawn-out time frames for resolution” that they faced five years ago. The IRS is instructing its employees to advise identity theft victims that it will take 180 days – half a year – to resolve their cases. Complicated cases inevitably will take longer. Thus, the IRS’s procedural changes are not providing faster relief.
The report also says the IRS has decided to reverse course and decentralize victim assistance. It recently created specialized units within each of 21 individual functions to work on identity theft cases, apparently under the belief that most identity theft cases involve a single issue that the relevant specialized unit can work most efficiently. The report expresses concern about this backtracking from a centralized approach.
OTHER KEY ISSUES ADDRESSED
The IRS’s failure to provide tax refunds to victims of preparer fraud. When a taxpayer is victimized by a preparer who receives a fraudulent refund by paper check, the IRS will issue a replacement refund to the taxpayer.
However, the IRS will not issue a replacement refund when a taxpayer is victimized by a preparer who receives the fraudulent refund by altering the bank routing number on a direct-deposit request, even though the IRS has received legal advice that it may do so.
The IRS’s extraordinarily high audit rate of taxpayers who claim the adoption tax credit.
Congress created the adoption tax credit to help low and middle income families afford the costs of an adoption, which are estimated to run as high as $40,000. Yet the IRS, partly using income-based rules, selected 69 percent of tax returns claiming the credit during the 2012 filing season for audit, compared with one percent of returns overall.
These audits imposed significant burden on the affected taxpayers for several reasons, most notably because the median refund claim constituted nearly one-quarter of the taxpayers’ adjusted gross income for the year, and the audits on average took over four months.
Despite the burden, the payoff was relatively small. The IRS denied only about 10 percent of the amounts claimed in tax year 2010, and as of mid-November had denied only about 1.5 percent of the amounts claimed in tax year 2011. The excessive focus on returns claiming the adoption credit burdened many taxpayers and could have the effect of negating Congress’s intent to encourage adoptions, the report says.
The IRS’s Offshore Voluntary Disclosure programs and their failure to distinguish adequately between “bad actors” and “benign actors.” The IRS has sought to increase enforcement of Foreign Bank and Financial Accounts (FBAR) reporting requirements in recent years and has offered a series of voluntary disclosure programs designed to settle with taxpayers who had failed to file required FBAR forms.
However, the report says, the programs generally applied a “one-size-fits-all” approach that required the payment of significant penalties and did not distinguish between “bad actors” and “benign actors.” By generally requiring taxpayers who make voluntary disclosures to “opt out” of the disclosure program and submit to comprehensive audits in order to avoid draconian penalties, the report argues that the program has caused excessive burden and fear for taxpayers who had reasonable cause for not filing FBAR forms or whose failure to file was inadvertent.
Research Study on Factors Influencing Voluntary Tax Compliance by Small Businesses. Volume 2 of the report contains six research studies, including preliminary results of a survey of sole proprietors that TAS commissioned to better understand factors that may affect income tax reporting compliance.
The Advocate’s office undertook the study because the IRS has estimated that only 43 percent of sole proprietor income is reported on tax returns, representing the largest portion of the tax gap (i.e., tax that is owed but is not timely and voluntarily paid). Developing a more complete picture of the attitudes of this category of taxpayers therefore could assist the IRS in improving tax compliance. Based on IRS computer scoring of the likely compliance level of tax returns, the Advocate’s office selected a sample of the most compliant and the least compliant returns and commissioned an anonymous survey of certain groups of these taxpayers to determine attitudinal and other differences.
The aforementioned were experts taken from Nina Olsen the National Taxpayers Advocate.
